ITEM 1. BUSINESS
This annual report contains forward-looking statements. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or
other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements
to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States
Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all
references to "common shares" refer to the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", and "company" mean Century Cobalt Corp., unless the context
clearly requires or states otherwise.
CORPORATE OVERVIEW
We are an exploration stage company engaged in the acquisition, exploration and development of mineral properties.
The address of our principal executive office is located at 10100 Santa Monica Blvd., Suite 300, Century City, CA 90067
USA.
Our common stock is quoted on the OTC Bulletin Board under the symbol "CCOB".
CORPORATE HISTORY
We were incorporated in the State of Nevada on April 29, 2008, under the name "Mayetok, Inc.". As Mayetok, Inc. we were
engaged in the development of a website to market vacation properties in the Ukraine.
On June 8, 2010, we initiated a one (1) old for 35 new forward stock split of our issued and outstanding common stock. As a
result, our authorized capital increased from 100,000,000 to 3,500,000,000 shares of common stock and the issued and outstanding increased from 2,200,000 shares of common stock to 77,000,000 shares of common stock, all with a par value of $0.001.
Also on June 8, 2010, we changed our name from "Mayetok, Inc." to "First American Silver Corp.", by way of a merger with
our wholly owned subsidiary First American Silver Corp., which was formed solely for the change of name. We changed the name of our company to reflect the new direction of our company in the business of acquiring, exploring and developing mineral
properties.
On June 18, 2018, we changed our name from "First American Silver Corp." to “Century Cobalt Corp.”, by way of a merger with
our wholly owned subsidiary Century Cobalt Corp., which was formed solely for the change of name. We changed the name of our company to reflect the new direction of our company in the business of acquiring, exploring and developing cobalt mineral
properties. Our name change became effective with the Over-the-Counter Markets at the opening of trading on June 18, 2018, on which date we adopted the new stock symbol "CCOB”.
OUR CURRENT BUSINESS
On August 7, 2018, we entered into an assignment agreement with Oriental Rainbow Group Ltd., in regards to the acquisition
of certain mineral claims in Lemhi County, Idaho known as the “Idaho Cobalt Belt”.
Oriental Rainbow and Plateau Ventures LLC had entered into a purchase agreement dated September 4, 2017, wherein Oriental
Rainbow had acquired from Plateau a 100% interest in the property, subject to certain subsequent payments and conditions.
The claims comprising the property (649 claims)
initially totaled approximately 12,980 acres, subject to an option under the purchase agreement for the acquisition of additional claims. Such option had been exercised with additional claims acquired, resulting in a total of 695 claims
comprising approximately 13,900 acres.
Oriental Rainbow has assigned its interest in the property to us in consideration for 2,500,000 restricted shares of common
stock (the “Consideration Shares”). We have assumed all of Oriental Rainbow’s obligations under the purchase agreement, which material obligations include: the issuance of up to 500,000 restricted shares of common stock to Plateau upon listing on a
recognized stock exchange; paying pending BLM fees for the claims in the amount of $108,000; and paying Plateau $1,000,000 in four equal staged payments upon completion of a positive feasiblity study on the property.
Century Cobalt’s, acreage, known as the “Emperium Cobalt Project,” as noted above totals 13,900 Acres / 5,625 Hectares,
making it larger than the combined land claims of the 5 largest publicly traded companies currently active in the Idaho Cobalt Belt. The project is located approximately 16 miles (26 km) southwest of Salmon, Idaho.
Property Information:
The Idaho Cobalt Belt is a northwest-southeast trending belt of cobalt- and copper-bearing mineral deposits and prospects.
The belt is at least 40 miles long (64 km) and up to 6 miles (10 km) wide.
Between 1902 and 1968, millions of tonnes of ore were mined in the Idaho Cobalt Belt within the Blackbird Mining area.
Total past production from the Blackbird Mine (to the immediate west of our Emperium Cobalt Project) was roughly 2.4
million tons of ore containing 19 thousand tons of cobalt, with the mine reaching its maximum production in 1958 at annual output of 2,000 tons cobalt.
As the only primary cobalt mine in the US to date, the mine site became a superfund site and was cleaned up in the 1990s.
2019 Exploration Program
The company completed a preliminary 2018 exploration program in the Idaho Cobalt Belt. During the 2018 campaign, the
location of two known historic mineral prospects on our property were confirmed and sampled. In addition, a number of previously unknown prospects were also discovered by our exploration team and sampled. By 2018 year-end the Century field crew
had collected over 800 soil samples and 150 rock samples, with the majority of the samples being sent for analysis to ALS Labs in Reno (NV). The results so far include:
Rock Samples:
0.1525% Co, 3.27 g/t Au, 27.7 g/t Ag, 4.38% Cu
149ppm Co, 12.9 g/t Au, 162 g/t Ag, 1.224% Cu
255 ppm Co, 4.89 g/t Au, 80.3 g/t Ag, 17.15% Cu
337ppm Co, 1.2 g/t Au, 62.2 g/t Ag, 16.85% Cu
6.93 g/t Au, 2690 g/t Ag, 2.62 % Cu, 5.53% Pb, 3.54% Zn
0.769 g/t Au, 522 g/t Ag, 13.15% Pb, 12% Zn
Soils Samples:
0.1175% Co, 11 ppm Cu and 299 ppm As
1.525% Cu, 0.2 g/t Au, 5.8g/t Ag and 1430 ppm As
0.998% Cu, 5 g/t Ag and 1630 ppm As
0.628% Cu, 0.188 g/t Au, 1.5g/t Ag and 1320 ppm As
0.278% Cu, 0.28 g/t Au, 13g/t Ag and 2180 ppm As
Cobalt Plus Co-Products
These early results confirm the strong Cobalt potential of the properties, while the findings for Copper (Cu), Gold (Au)
and Silver (Ag), along with Lead (Pb) and Zinc (Zn) suggests co-products that could ultimately positively impact project economics. Additionally, Arsenic (As), (like cobalt, a US Government-designated Critical Mineral), will be assessed as a
potential co-product. Essential for the production of Gallium-Arsenide semiconductor chips, Arsenic is a key raw material for solar panels, telecoms applications, infrared and optical applications.
2019 Exploration Program
The company has recently completed a Satellite Thermal Study over its entire licence area, the results of which will be
integrated into the company’s geological database and combined with the soil and rock samples to further define areas of interest.
To commence the company’s 2019 exploration program, a drone-mounted Magnetic Survey is planned in the coming months that
will further enhance the Company’s growing understanding of the geology, structure and mineral potential of the licence area. The company anticipates following up on a number of the promising targets generated so far, to identify those that
warrant further investigation by trenching and drilling.
COMPETITION
The mineral exploration industry is highly competitive. We are a new exploration-stage company and have a weak competitive
position in the industry. We compete with junior and senior mineral exploration companies, independent producers and institutional and individual investors who are actively seeking to acquire mineral exploration properties throughout the world
together with the equipment, labor and materials required to operate on those properties. Competition for the acquisition of mineral exploration interests is intense with many mineral exploration leases or concessions available in a competitive
bidding process in which we may lack the technological information or expertise available to other bidders.
Many of the mineral exploration companies with which we compete for financing and for the acquisition of mineral
exploration properties have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquiring mineral exploration interests of merit or on exploring or developing
their mineral exploration properties. This advantage could enable our competitors to acquire mineral exploration properties of greater quality and interest to prospective investors who may choose to finance their additional exploration and
development. Such competition could adversely impact our ability to attain the financing necessary for us to acquire further mineral exploration interests or explore and develop our current or future mineral exploration properties.
We also compete with other junior mineral exploration companies for financing from a limited number of investors that are
prepared to invest in such companies. The presence of competing junior mineral exploration companies may impact our ability to raise additional capital in order to fund our acquisition or exploration programs if investors perceive that investments
in our competitors are more attractive based on the merit of their mineral exploration properties or the price of the investment opportunity. In addition, we compete with both junior and senior mineral exploration companies for available resources,
including, but not limited to, professional geologists, land specialists, engineers, camp staff, helicopters, float planes, mineral exploration supplies and drill rigs.
General competitive conditions may be substantially affected by various forms of energy legislation and/or regulation
introduced from time to time by the governments of the United States and other countries, as well as factors beyond our control, including international political conditions, overall levels of supply and demand for mineral exploration.
In the face of competition, we may not be successful in acquiring, exploring or developing profitable mineral properties or
interests, and we cannot give any assurance that suitable oil and gas properties or interests will be available for our acquisition, exploration or development. Despite this, we hope to compete successfully in the mineral exploration industry by:
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relying on the strength of our management’s contacts; and
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using our size and experience to our advantage by adapting quickly to changing market conditions or responding
swiftly to potential opportunities.
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GOVERNMENT REGULATION
Any operations at our cobalt properties will be subject to various federal and state laws and regulations in the United
States which govern prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, protection of the environment, mine safety, hazardous substances and other matters. We will be required to
obtain those licenses, permits or other authorizations currently required to conduct exploration and other programs. There are no current orders or directions relating to us or to our cobalt properties with respect to the foregoing laws and
regulations. Such compliance may include feasibility studies on the surface impact of our proposed operations, costs associated with minimizing surface impact, water treatment and protection, reclamation activities, including rehabilitation of
various sites, on-going efforts at alleviating the mining impact on wildlife and permits or bonds as may be required to ensure our compliance with applicable regulations. It is possible that the costs and delays associated with such compliance
could become so prohibitive that we may decide to not proceed with exploration, development, or mining operations on any of our mineral properties. We are not presently aware of any specific material environmental constraints affecting our
properties that would preclude the economic development or operation of property.
ENVIRONMENTAL REGULATIONS
We are not aware of any material violations of environmental permits, licenses or approvals that have been issued with
respect to our operations. We expect to comply with all applicable laws, rules and regulations relating to our business, and at this time, we do not anticipate incurring any material capital expenditures to comply with any environmental regulations
or other requirements.
While our intended projects and business activities do not currently violate any laws, any regulatory changes that impose
additional restrictions or requirements on us or on our potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of
operations.
RESEARCH AND DEVELOPMENT
We have not incurred any research and development expenditures over the past three fiscal years.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment over the twelve months ending November 30, 2019.
SUBSIDIARIES
Our sole wholly owned subsidiary is Emperium 1 Holdings Corp.
CORPORATE OFFICES
Our principal office is located at 10100 Santa Monica Blvd., Suite 300, Century City, CA 90067 USA. and is provided to us
at no cost.
EMPLOYEES
We have no employees other than our chief executive officer, Alexander Stanbury with whom we entered into a service
agreement on September 14, 2018.
On September 14, 2018, we entered into a consulting agreement with Alexander Stanbury, whereby Mr. Stanbury agreed to
provide consulting services to us regards to his position is our President and Chief Executive Officer. The agreement has a three year term, commencing August 1, 2018. As compensation for entering into the agreement and providing such consulting
services, we have agreed to compensate Mr. Stanbury by issuing 5,000,000 restricted common shares of our capital stock. In addition, Mr. Stanbury will be receiving a salary of $102,000 per annum and shall be entitled to receive an additional
1,000,000 common shares on each anniversary of the effective date of the agreement.
INTELLECTUAL PROPERTY
We do not own, either legally or beneficially, any patent or trademark, and have not registered any rights we may have
under copyright.
DESCRIPTION OF SECURITIES
COMMON STOCK
Our authorized capital stock consists of 3,500,000,000 shares of common stock, par value $0.001 per share, and 20,000,000
shares of preferred stock, par value $0.001 per share.
The holders of our common stock:
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Have equal ratable rights to dividends from funds legally available therefore, when, as and if declared by our
Board of Directors;
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Are entitled to share ratably in all of our assets available for distribution to holders of common stock upon
liquidation, dissolution or winding up of our affairs;
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Do not have pre-emptive, subscription or conversion rights and there are no redemption or sinking fund provisions
or rights; and
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Are entitled to one non-cumulative vote per share on all matters on which stockholders may vote.
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The shares of common stock are not subject to any future call or assessment and all have equal voting rights. There are no
special rights or restrictions of any nature attached to any of the common shares and they all rank at equal rate or PARI PASSU, each with the other, as to all benefits, which might accrue to the holders of the common shares. All registered
stockholders are entitled to receive a notice of any general annual meeting to be convened by our Board of Directors.
At any general meeting, subject to the restrictions on joint registered owners of common shares, on a showing of hands
every stockholder who is present in person and entitled to vote has one vote, and on a poll every stockholder has one vote for each share of common stock of which he is the registered owner and may exercise such vote either in person or by proxy.
To the knowledge of our management, at the date hereof, our sole officer and director is the only person to exercise control, directly or indirectly, over more than 10% of our outstanding common shares. See "Security Ownership of Certain Beneficial
Owners and Management."
We refer you to our Articles of Incorporation and Bylaws, copies of which were filed with the registration statement of
which this prospectus is a part, and to the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of our securities.
REPORTS TO SECURITY HOLDERS
We are not required to deliver an annual report to our stockholders but will voluntarily send an annual report, together
with our annual audited financial statements upon request. We are required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission. Our Securities and Exchange Commission
filings are available to the public over the Internet at the SEC's website at http://www.sec.gov.
The public may read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 100 F Street, NE,
Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC. The Internet address of the site is http://www.sec.gov.
ITEM 1A. RISK FACTORS
RISKS RELATED TO OUR COMPANY
THE FACT THAT WE HAVE NOT EARNED ANY OPERATING REVENUES SINCE OUR INCORPORATION RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY
TO CONTINUE TO EXPLORE OUR MINERAL PROPERTIES AS A GOING CONCERN.
We have not generated any revenue from operations since our incorporation and we anticipate that we will continue to incur
operating expenses without revenues. We had cash in the amount of $1,172 as of November 30, 2018 and a working capital deficit of $745,343. We have also incurred a cumulative net loss of $2,577,305 from our inception on April 29, 2008 through
November 30, 2018. We estimate that our average monthly operating expenses will be approximately $28,500, including management services and administrative costs. Should the results of our planned exploration require us to increase our current
operating budget, we may have to raise additional funds to meet our currently budgeted operating requirements for the next 12 months. As we cannot assure a lender that we will be able to successfully explore and develop our mineral property, we
will probably find it difficult to raise debt financing from traditional lending sources. We have in the past raised our operating capital from sales of equity securities, but there can be no assurance that we will continue to be able to do so. If
we cannot raise the money that we need to continue exploration of our mineral property, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these were to occur, there is a substantial risk that our business
would fail.
These circumstances lead our independent registered public accounting firm, in their report dated April 10, 2019, to
comment about our company's ability to continue as a going concern. Management plans to seek additional capital through a private placement of its capital stock. These conditions raise substantial doubt about our company's ability to continue as a
going concern. Although there are no assurances that management's plans will be realized, management believes that our company will be able to continue operations in the future. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event our company cannot continue in existence." We continue to experience net operating losses.
BECAUSE WE ARE A SHELL COMPANY, THE HOLDERS OF OUR RESTRICTED SECURITIES WILL NOT BE ABLE TO SELL THEIR SECURITIES IN
RELIANCE ON RULE 144 UNTIL WE CEASE BEING A SHELL COMPANY.
We are a shell company as that term is defined by applicable federal securities laws. Specifically, because of the nature
and amount of our assets and our very limited operations, pursuant to applicable federal rules, we are considered a shell company. Applicable provisions of Rule 144 specify that during that time that we are a shell company and for a period of one
year thereafter, holders of our restricted securities may not sell those securities in reliance on Rule 144. This restriction may have potential adverse effects on future efforts to raise capital. One year after we cease being a shell company,
assuming we are current in our reporting requirements with the Securities and Exchange Commission, holders of our restricted securities may then sell those securities in reliance on Rule 144 (provided, however, those holders satisfy all of the
applicable requirements of that rule). For us to cease being a shell company, we must have more than nominal operations or more that nominal assets or assets which do not consist solely of cash or cash equivalents.
BECAUSE OF THE SPECULATIVE NATURE OF EXPLORATION OF MINERAL PROPERTIES, WE MAY NEVER DISCOVER A COMMERCIALLY EXPLOITABLE
QUANTITY OF MINERALS, OUR BUSINESS MAY FAIL AND INVESTORS MAY LOSE THEIR ENTIRE INVESTMENT.
We are in the very early exploration stage and cannot guarantee that our exploration work will be successful, or that any
minerals will be found, or that any production of minerals will be realized. The search for valuable minerals as a business is extremely risky. Substantial investment will be required to move our company toward the production of minerals. This may
require bringing in a partner to make the necessary investment, but there are no plans at this time for any form of partnership or merger. We can provide investors with no assurance that exploration on our properties will establish that
commercially exploitable reserves of minerals exist on our property. Additional potential problems that may prevent us from discovering any reserves of minerals on our property include, but are not limited to, unanticipated problems relating to
exploration and additional costs and expenses that may exceed current estimates. If we are unable to establish the presence of commercially exploitable reserves of minerals on our property, our ability to fund future exploration activities will be
impeded, we will not be able to operate profitably and investors may lose all of their investment in our company.
WE HAVE NO KNOWN MINERAL RESERVES AND WE MAY NOT FIND ANY COBALT AND, EVEN IF WE FIND COBALT, IT MAY NOT BE IN ECONOMIC
QUANTITIES. IF WE FAIL TO FIND ANY COBALT OR IF WE ARE UNABLE TO FIND COBALT IN ECONOMIC QUANTITIES, WE WILL HAVE TO SUSPEND OPERATIONS.
We have no known mineral reserves. Additionally, even if we find cobalt in sufficient quantity to warrant recovery, it
ultimately may not be recoverable. Finally, even if any cobalt is recoverable, we do not know that this can be done at a profit. Failure to locate cobalt in economically recoverable quantities will cause us to suspend operations.
SUPPLIES NEEDED FOR EXPLORATION MAY NOT ALWAYS BE AVAILABLE. IF WE ARE UNABLE TO SECURE EXPLORATION SUPPLIES WE MAY HAVE TO
DELAY OUR ANTICIPATED BUSINESS OPERATIONS.
Competition and unforeseen limited sources of supplies needed for our proposed exploration work could result in occasional
spot shortages of supplies of certain products, equipment or materials. There is no guarantee we will be able to obtain certain products, equipment and/or materials as and when needed, without interruption, or on favorable terms. Such delays could
affect our anticipated business operations and increase our expenses.
BECAUSE OF THE UNIQUE DIFFICULTIES AND UNCERTAINTIES INHERENT IN MINERAL EXPLORATION VENTURES, WE FACE A HIGH RISK OF
BUSINESS FAILURE.
Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the
high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan
to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of the
mineral claim may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of
our exploration do not reveal viable commercial mineralization, we may decide to abandon our claims. If this happens, our business will likely fail.
THE MARKETABILITY OF NATURAL RESOURCES WILL BE AFFECTED BY NUMEROUS FACTORS BEYOND OUR CONTROL, WHICH MAY RESULT IN US NOT
RECEIVING AN ADEQUATE RETURN ON INVESTED CAPITAL TO BE PROFITABLE OR VIABLE.
The marketability of natural resources, which may be acquired or discovered by us, will be affected by numerous factors
beyond our control. These factors include market fluctuations in cobalt pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the
importing and exporting of mineral resources and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on
invested capital to be profitable or viable.
EXPLORATION AND PRODUCTION ACTIVITIES ARE SUBJECT TO CERTAIN ENVIRONMENTAL REGULATIONS, WHICH MAY PREVENT OR DELAY THE
COMMENCEMENT OR CONTINUATION OF OUR OPERATIONS.
In general, our exploration and production activities are subject to certain federal, state and local laws and regulations
relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuation of a given operation. Specifically, we may be subject to legislation
regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state
authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent
than other companies in the industry.
ANY CHANGE TO GOVERNMENT REGULATION/ADMINISTRATIVE PRACTICES MAY HAVE A NEGATIVE IMPACT ON OUR ABILITY TO OPERATE AND OUR
PROFITABILITY.
The business of mineral exploration and development is subject to substantial regulation under various countries’ laws
relating to the exploration for, and the development, upgrading, marketing, pricing, taxation, and transportation of mineral resources and related products and other matters. Amendments to current laws and regulations governing operations and
activities of mineral exploration and development operations could have a material adverse impact on our business. In addition, there can be no assurance that income tax laws, royalty regulations and government incentive programs related to the
properties and the mineral exploration industry generally will not be changed in a manner which may adversely affect our progress and cause delays, inability to explore and develop or abandonment of these interests.
Permits, leases, licenses, and approvals are required from a variety of regulatory authorities at various stages of
exploration and development. There can be no assurance that the various government permits, leases, licenses and approvals sought will be granted in respect of our activities or, if granted, will not be cancelled or will be renewed upon expiry.
There is no assurance that such permits, leases, licenses, and approvals will not contain terms and provisions, which may adversely affect our exploration and development activities.
IF WE ARE UNABLE TO HIRE AND RETAIN KEY PERSONNEL, WE MAY NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN.
Our success is largely dependent on our ability to hire highly qualified personnel. This is particularly true in highly
technical businesses such as resource exploration. These individuals are in high demand and we may not be able to attract the personnel we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel,
or may lose such employees after they are hired. Failure to hire key personnel when needed, or on acceptable terms, would have a significant negative effect on our business.
RISKS ASSOCIATED WITH OUR COMMON STOCK
TRADING ON THE OTC MARKETS MAY BE VOLATILE AND SPORADIC, WHICH COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK AND MAKE
IT DIFFICULT FOR OUR STOCKHOLDERS TO RESELL THEIR SHARES.
Our common stock is quoted on the OTCQB tier of the electronic quotation system operated by OTC Markets. Trading in stock
quoted on the OTC Markets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common
stock for reasons unrelated to operating performance. Moreover, the OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or
a stock exchange like NYSE or Amex. Accordingly, shareholders may have difficulty reselling any of the shares.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS AND FINRA'S SALES
PRACTICE REQUIREMENTS, WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny
stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or
individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the
rules, to deliver
a standardized risk disclosure document in a
form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, FINRA has adopted rules that
require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may
limit your ability to buy and sell our stock.
TRENDS, RISKS AND UNCERTAINTIES
We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether,
or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to
our common shares.